There was no escaping the harsh realities of the nation’s deepest recession since the 1980s at Preview 2009, the annual economic outlook presented Thursday by the Las Vegas Chamber of Commerce.
The unemployment rate has climbed to 9.1 percent as some 20,000 jobs have been lost in Las Vegas. Home prices have declined 31 percent with foreclosures saturating the market. Multibillion-dollar Strip resort projects have been scrapped.
“In the past, Las Vegas was always thought to be recession-proof, the last to go into a recession and the first to come out of it,” said Rossi Ralenkotter, president and chief executive of Las Vegas Convention and Visitors Authority. “That was true to a point, but that’s not the case today. These are crazy times. We’re experiencing things we never experienced before.”
Visitor volume declined by about 4 percent in 2008 and is expected to be down 4 percent to 5 percent again this year, Ralenkotter said. Occupancy levels for nearly 138,000 hotel rooms will drop to about 83 percent, still above the national average of 57 percent, but short of the 90 percent level that Las Vegas hotel operators enjoyed through 2007.
On the positive side, some of the fundamentals that made Las Vegas one of the nation’s fastest-growing economies during the past 20 years still exist, said Jeremy Aguero, principal of Applied Analysis research firm and a featured speaker at Preview 2009.
The “overcorrection” in housing prices provides an opportunity to purchase a home for $160,000 to $200,000, about the same as prices in 2003 and 2004, Aguero noted.
“It’s worth remembering that the losses we’ve had in the last 18 months is from growth that other communities never had,” he said. “Close your eyes and imagine where the economy is better. Sacramento, California? Sarasota, Florida? Des Moines (Iowa)?”
The biggest problem facing Las Vegas is the substantial slowdown in nonresidential construction, Aguero said. With rising vacancy in the office, retail and industrial markets, planned projects are being shelved, he said.
Some projects have been completed such as the South Point expansion, Aliante Station and Eastside Cannery. Echelon at Centennial Hills, a mixed-use development in northwest Las Vegas, and Onyx condos in the resort corridor also made it to completion.
Progress continues on nearly $20 billion in projects, including M Resort, Westgate Tower, Hard Rock expansion, Fountainebleau, Cosmopolitan, Tivoli Village at Queensridge and CityCenter.
“Will that be enough to shore up our economy? That’s a tough question,” Aguero said. “The pipeline coming in behind these projects is significantly less. That will continue to put pressure on our economy as we move forward.”
Pessimistic economists have said the United States is in the midst of a 10-year deflationary period similar to what Japan experienced. Former Labor Secretary Robert Reich disagrees.
“I don’t think that’s likely to happen. The government in Japan had no tools to deal with deflation. I think our economy is more resilient than that,” Reich said.
Reich came down on Wall Street for using “easy money” to invest in fancy derivatives, creating a speculative bubble and leverage that was beyond control.
“Wall Street was like a big Ponzi scheme. It was Bernie Madoff tripled,” he said. “They handed out bonuses over $18 billion for bank executives in 2008. Does that strike you as realistic?”
Reich said another issue not getting enough publicity is the consumer demand side of the equation, which goes back to the 1970s and ’80s when wages started to stagnate. Consumer spending accounts for 70 percent of the national economy, he said.
“The problem is we’re in a vicious circle because as people lose jobs, they don’t have money to buy anything, which means less demand for goods and services, which leads to more layoffs,” he said.
Contact reporter Hubble Smith at hsmith@reviewjournal.com or 702-383-0491.
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